Financial regulators continue to play catch up as robo-advisors and ETFs cut out the middleman for investors
Wealth Management Legal Report
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In a world where consumers are always looking for opportunities to cut out middlemen and gatekeepers, finance is no exception. The rise of do-it-yourself online investing is raising new questions for regulators and lawyers serving clients in wealth management say regulators need to get with the times.
In a thriving economy with a soaring stock market, Canada’s traditional retail investment products seem just fine to investors, says Kevin Rusli, a partner at Blake Cassels & Graydon LLP. But the economy is slowing down. After a three-per-cent growth in 2017, Canada’s GDP lagged last year with an expansion of only 1.8 per cent. When growth begins to slow and a recession seems near, Canadians will increasingly scrutinize their management fees, and in Canada, retail investment products are among the most expensive in the world, he says. Middle-income investors will tend to venture away from financial advisors and mutual funds in these circumstances to something less expensive — such as do-it-yourself investing products like robo-advisors or exchange traded funds.
“People are realizing that the asset management industry may no longer be enough for long-term sustainable growth,” Rusli says.
ETFs outpaced mutual funds in sales last year and are the fastest-growing area of Blake’s asset management practice, he says. Robo-advisors such as Wealthsimple, Questrade, Justwealth Financial Inc. and WealthBar are also ascending.